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European Chipmakers Express Concerns Over Growing Chinese Semiconductor Market
The European Commission is sounding alarms over the potential loss of market share for its chip manufacturers in China. This comes as Beijing ramps up investment in the semiconductor sector, striving for self-reliance in critical technologies. Notably, major companies such as NXP Semiconductors NV from the Netherlands, Infineon Technologies AG from Germany, and Japanese Renesas Electronics Corp. could be significantly impacted by China’s aggressive push to cultivate local semiconductor competitors.
Impact on MCU Production
These European and Japanese chipmakers primarily produce microcontrollers (MCUs) and other essential chips for industries like automotive, industrial applications, and consumer electronics. According to European Commission findings, discriminatory standards, local content requirements, and other non-tariff barriers are being implemented to promote the growth of domestic MCU companies in China. This shift poses a threat to foreign suppliers by leveraging China's vast electric vehicle (EV) market. Currently, China is responsible for 30% of the global MCU demand.
China’s Domestic Push
Bloomberg News previously reported that the Chinese government has quietly urged electric-vehicle manufacturers, including notable companies like BYD Co. and Geely Automobile Holdings Ltd., to increase their procurement from local chipmakers. This move is part of a broader strategy to lessen dependency on Western semiconductors and bolster the domestic industry.
Investments in Semiconductor Capacity
China is set to invest over $100 billion to construct new chip plants, aiming to produce semiconductors for a wide range of applications, from household appliances to smartphones. This expansion is a response to US-imposed restrictions on Chinese firms' access to high-end chips and the necessary production equipment. Beijing is focusing on legacy chips, which are less advanced than those restricted by the US, but still see growing demand, particularly in the EV and renewable energy markets.
China’s Growing Fab Capacity
The SEMI trade group projects that China will inaugurate 41 chip fabrication facilities between 2023 and 2027, outpacing any other region globally. These facilities will include plants capable of handling 300 mm and 200 mm wafers, the latter enabling more chip production due to their larger size.
International Implications
Chinese President Xi Jinping has called for increased innovation in response to global domination by other countries in key technologies, including semiconductors, highlighting the rising tech confrontation with the US. Concerns from Washington suggest that Chinese chipmakers might flood the international market with their products, similar to China’s actions in the solar and steel sectors. American officials have communicated these concerns to their European counterparts.
European Commission’s Analysis
The European Union's executive branch is scrutinizing the extent of its reliance on Chinese mature or lower-end chips. However, the latest analysis indicates that fears of Chinese chips swamping the global market are "less likely" to materialize. Given the high demand within China, any additional production capacity is expected to be absorbed domestically until at least 2030. This conclusion draws partly on data from Dutch equipment manufacturer ASML Holding NV. Additionally, Chinese chipmakers might curtail their capacity as price wars ensue amidst local oversupply, according to European officials.
